Understanding the importance of a investment’s Total Return

Through conversations with investors, I have discovered that a significant number of them lack a precise understanding of how their investments are performing. In this context, the IDC_TotalReturn function provided by IDC proves to be an invaluable tool for obtaining an accurate measure of annualized total return.

By utilizing IDC’s Total Return function, investors can gain a more comprehensive and precise assessment of the performance of their investments. This function takes into account various factors such as price appreciation, dividends, splits, and other relevant metrics to calculate the annualized total return. It offers a reliable and standardized method to evaluate investment performance over time, enabling investors to make informed decisions and comparisons.

Understanding the precise performance of investments is crucial for investors to monitor their financial growth, assess the effectiveness of their investment strategies, and make informed decisions regarding their portfolios. The utilization of specialized tools like IDC’s Total Return function can greatly assist in achieving this level of clarity and accuracy in evaluating investment performance.

The Southern Company Example
We’ve held the Southern company (ticker: SO) forever, an electric utility and dividend payer I consider it a “steady Eddie”.  I am curious about exactly how our investment over the last ten years.  That is: What is my annualized return?

I inserted the Total return function =IDC_TotalReturn(“SO”,”06/05/2013″, “06/05/2023”)  and IDC returned 9.58%.
Heres is how we calculate it at IDC

Ticker: SO
Purchase Date:     6/5/2013     Adjusted Purchase Price: $27.89
Last Close Date:  6/5/2023    Close Price:  $69.69

Annualized Total Return = (Current Close Price/Original Adjusted Close Price)^(365/(6/5/1023-6/5/2013))-1
=(69.69/27.89)^(365/(6/5/2023-6/5/2013))*100
9.58%

The annualized total return allows for easier comparison of investment performance over different holding periods and provides a standardized metric to assess the annual growth rate of an investment.  In this case,  I intially thought 9.58% was a good return but I researched and read The historical average yearly return of the S&P 500 over the last 10 years is 12.475%.  just to double check I put VOO (Vanguards S&P EFT) into the same function IDC_TotalReturn(“VOO”,”06/05/2013″, “06/05/2023”)  and it returned 12.36%.  It appears my steady Eddie SO is a laggard

 

Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top

Try Free demo!

Please enter your email address and hit the submit button and we will email you Excel Add-In with Complete Instructions